Skills Shortages and Training Needs of MNCs in the Philippines (Issue No. 20)

INTRODUCTION

The Asia-Pacific Economic Cooperation (APEC) is a regional grouping of 21 economies situated within the Pacific Rim. Its fundamental objective is the liberalization and facilitation of trade and investment aim at accelerating economic growth and development among member economies. APEC ascribed to the idea that human resource development is fundamental to economic development. Without adequate human resources, the opportunities offered by trade and investment liberalization would diminished considerably. It was no less than former President Fidel V. Ramos who advance the idea that the greatest economic resource of APEC is its people.

APEC believes that skill shortages can constrain the expansion of output in the short-term and limit the possibility of diversifying productive structure in the long-term. APEC member economies expressed concern that the growth and development opportunities afforded by liberalization may be jeopardized by the gap between the skills needed by industry and the output of educational and training institutions.

In view of this, APEC spearheaded a study in 2001 focused on Multinational Corporations in selected economies. The research aimed to assess the nature and extent of skill shortages and training needs in eight selected APEC economies by focusing on the experiences of multinational corporations in four industries--manufacturing, banking and finance, insurance and business services. The MNCs were chosen as they can benchmark the skills of their workers against international standards with other MNCS.

KEY STUDY FINDINGS

The Philippine country paper that contains the results fo the survey highlights the following:

Philippines Still a Choice for MNCs
The survey of 81 MNCs revealed that the country remained a location of choice by multinational corporations. Large pool of educated, English-speaking and highly trainable manpower continued to be the driving force in attracting foreign capital to the country. On the other hand, deficiencies in infrastructure, political unrest and peace and order were seen as hindering factors.

Cause of Skill Shortage is Complex
Skill shortages could be traced back to the faulty educational system, myopic policy of labor export and pervasive technical change.

The study cited that educational flaws stemmed up from poor curriculum, inadequate teacher's training, and low public and private investment in education. The policy emphasis of broadening access to education resulted to sacrificing quality as resource requirements became dispersed. Mismatches between industry requirements and educational preparation of new entrants to the labor force also exist.

The policy of encouraging the export of labor also contributed to the skill shortage. The study opined that the task of dealing with skill shortage is less urgent compared to the malaise of labor surplus.

Of course with fast-changing technologies demand for new skills would render some existing skills obsolete.

EXTENT OF SKILL SHORTAGES AND DEFICIENCIES

The survey utilized a number of variables to indicate the nature and extent of skill shortages faced by MNCs, namely: (1) perceived hurdles in recruiting personnel; (2) the extent of the use of subcontracting; and (3) the time required to recruit IT personnel. Skills deficiencies can be gleaned from the specific skills identified that would be needing improvement.

Skill Shortages. Firms were found out to experience recruitment difficulties for managers and professionals than recruiting clerical, sales, services and production personnel. The study results showed that looking for non-technical workers is simpler as they can be easily trained even if they are skills deficient upon entry. Recruitment for technical positions is another case as there are minimum levels of competencies required of the workers at the time of job entry. Hence firms tend to exercise greater selectivity.

The MNCs reported that they find it difficult to fill up technical positions especially in the field of IT. Dearth in the supply of communication and computer technicians, electronic and maintenance engineers/technicians and network technicians are common among surveyed MNCs as it takes them 4 to 7 weeks to fill up this technical positions. Supply of IT personnel is also wanting as it takes MNCs 12 to 15 weeks before finding out qualified applicants for the positions of project managers, program designers, system consultants and system analysts. This positions generally require experience, leadership and communication skills aside from technical proficiency.

This illustrates the "brain drain" the country is experiencing as the more capable and talented ones are being lured by the glitter of overseas employment.

Skills Deficiencies. Most of the MNCs indicated that the skills of their workers that needs to be improved pertained to:

Management and supervision;

Interpersonal and communication skills;

Planning and problem solving;

Use of technology;

Self-management;

Multi-skilling; and

Teamwork.

In contrast, MNCs expressed satisfaction with the level of literacy and numeracy skills of Filipino workers.

HOW MNCs ARE COPING?

There are several ways by which MNCs deal with the problems of skill deficiencies and shortages. The most common ones are expatriation, recruitment, job outsourcing and training.

Expatriation. Results revealed that hiring expatriates in filling vacancies in MNCs is seldom done. Of the surveyed MNCs only 17 percent of managers and less than 1 percent of professional and technical staff are expatriates. The reasons being are the large base of employment hopefuls and the labor market restrictions on the employment of foreigners in the country.

Recruitment. Notwithstanding the large pool of applicants, the MNCs still experienced the lack of qualified applicants. Thus, they are employing various modes of recruitment to ensure the competitiveness of the selection process.

Job Contracting. More than four-fifths of the Philippine sample were found to outsourced one or several tasks. The most commonly outsourced tasks are those that would require general skills such as maintenance, security and clerical. The main motivation by MNCs for job contracting is to keep its permanent staff lean but mean and for greater flexibility. Multinationals tend to maintain permanent platilla position for firm-specific skills.

Training. Sample MNCs indicated that high proportion of employees in all ranks has been exposed to various forms of training whether internal or external to the company as a means of correcting skill deficiencies. Manufacturing firms located in the Philippines tend to spend higher training expenditures compared to Malaysia but lower when compared to those situated in Indonesia, Singapore, Taiwan and Thailand. Training expenditures for business and services firms were found to be lesser in Indonesia and Malaysia but greater in Singapore, Taiwan and Thailand as compared to the Philippines.

CONCLUSIONS AND POLICY RECOMMENDATIONS

The results of the survey showed that there are skills bottleneck in the supply of managerial, professional and technical labor. Abundant stock of production workers remains the country's comparative advantage. It also showed that the skill shortages reflect the existing mismatch between supply and demand in the production sector. This is well exemplified in the case of IT manpower where the huge turn out of graduates has failed to stem the growing shortage of qualified IT personnel.

Intensifying firm-level training should be encouraged to generate the right kind of skills required by companies. However, reforms should be instituted in the educational system as firm-level training cannot constitute for quality education. Firms are not expected to hone the workers' generic skills that should been developed by the educational system. Likewise, there are limits to which MNCs can be made to invest in human resource development. The study suggested that improving the quality of education is more compelling in resolving the twin malaise of unemployment and skill shortages than broadening education access at quality's expense.